Buckle up, it’s going to be another bumpy ride. The rout sparked by fears of the spreading coronavirus is showing no signs of abating today.

Europe’s main markets are down 3% to 5% and MSCI’s world index is down more than 1%, almost 10% for the week — the worst since October 2008. U.S. futures are pointing to a 1% drop at opening bell, after falling into correction territory yesterday. The S&P 500 has lost 12% since hitting a record high just nine days ago.

The VIX index, which measures volatility, is trading at 28%, higher than 90% of all observations in the last 30 years.

Now take a deep breath. What is shaping up to be the worst sell-off since the 2008 crash may also be the buying opportunity of the decade, analysts say.

“With markets on the brink of correction territory, panic-selling, mis-pricing of high quality equities, and lower entry points, this could turn out to be one of the key buying opportunities in the last 10 years,” said deVere CEO Nigel Green.

“Global investors should not be spooked by the return of volatility on stock markets but, where possible use it to their financial advantage.”

UBS says history suggests attractive returns can be gained for investors who ride out the storm.

The key thing is that U.S. economic fundamentals are sound, suggesting that any disruption from the virus should be short-lived, it said. In the past when the VIX has been higher than 25% (higher than 85% of all observations) and less than 5% of banks were tightening lending standards (right now it is at 0%) equity market returns over the next six months have been over 15%, said UBS.

“While we are not trying to call a bottom of the market, past experience suggests this is a good time to invest in U.S. stocks for investors with a time horizon of several months or more.”

* * *

Concerns about the coronavirus has a group of economists calling for the Bank of Canada to make not just one rate cut, but two in succession.

C.D. Howe Institute’s monetary policy committee, made up of economists from the country’s big banks and academia, are recommending the bank cut its benchmark rate to 1.50% at its meeting this Wednesday, and then cut again at its April meeting to 1.25%. After that it should hold until early 2021.

The impact of the coronavirus was the chief concern of the group, which foresees declines in commodity prices, equity markets and export demand. “At this point it is impossible to know how large and long-lasting these effects will be but their implications for Canadian exports and consumer and business confidence are clearly negative,” the committee said.

But the economists are also worried about the Canadian economy in general. Teck Resources’ cancellation of its Frontier oilsands mine and a weak capital investment survey from StatsCan this week, signal “ominous implications for future productivity growth.”

A meeting is expected between Wet’suwet’en hereditary chiefs, federal and provincial officials in Smithers, B.C.

CRTC hearings on mobile wireless services

B.C. Finance Minister Carole James provides an overview of Budget 2020 to the Richmond Chamber of Commerce

Notable Earnings: SNC-Lavalin, Onex, Laurentian Bank

Today’s Data: Canadian GDP, U.S. personal income and spending

Capital investment intentions in Canada are set to rise for the fourth year in a row in 2020 — but most of it will be public spending, based on Statistics Canada’s annual CAPEX intentions survey. This year’s 2.8% growth is higher than 1.7% in 2019 but much slower than the 9.8% increase in 2018, the chart below by RBC Economics shows. Just 12 of the 20 industries plan to increase investment – fewer than both 2019 and 2018. Growth is led by the public sector, where investments are expected to jump 6.5%. RBC economist Ramya Muthukumaran says we got a preview of this in the recent B.C. budget which increased capital spending by a “whopping” 10.3%. Expect to see more of this as more provinces table their budgets, said Muthukumaran. Also of note, for the first time, the transportation and warehousing sector is expected to overtake quarrying, oil and gas extraction as the fastest growing sector at $44.3 billion. Outlays in the latter sector are expected to decline by 1.4%.

If Friday's gains are anything to go by, investors are champing at the bit

Comments

Postmedia is committed to maintaining a lively but civil forum for discussion and encourage all readers to share their views on our articles. Comments may take up to an hour for moderation before appearing on the site. We ask you to keep your comments relevant and respectful. We have enabled email notifications—you will now receive an email if you receive a reply to your comment, there is an update to a comment thread you follow or if a user you follow comments. Visit our community guidelines for more information and details on how to adjust your email settings.